Federal judge trims AI denial lawsuit against UnitedHealth Group

ST. PAUL, Minn. (CN) — A federal judge has allowed a class action against UnitedHealth Group for denying coverage to its customers to proceed despite dismissing five out of seven counts in an opinion filed Thursday.

The case, brought by several of the health insurance company’s customers who were denied benefit coverage and filed in the United States District Court of Minnesota, says UnitedHealth Group, UnitedHealthcare, and naviHealth Inc. routinely denied claims by using an artificial intelligence program instead of medical professionals for elderly patients under their Medicare Advantage plans.

Those denials led to worsening conditions for those covered by the Minnesota-based health insurers and, in some cases, were followed by the death of its customers, the plaintiffs allege, adding the AI program developed by naviHealth, which UHG owns, has a 90% error rate.

“Despite the high error rate, Defendants continue to systemically deny claims using their flawed AI model because they know that only a tiny minority of policyholders (roughly 0.2%) will appeal denied claims, and the vast majority will either pay out-of-pocket costs or forgo the remainder of their prescribed post-acute care,” the plaintiffs wrote in their complaint, filed in 2023. “Defendants bank on the patients’ impaired conditions, lack of knowledge, and lack of resources to appeal the erroneous AI-powered decisions.”

UHG is the largest insurance company in the U.S., with UHC acting as its insurance arm. It provides coverage for 52.9 million Americans.

“The fraudulent scheme affords Defendants a clear financial windfall in the form of policy premiums without having to pay for promised care, while the elderly are prematurely kicked out of care facilities nationwide or forced to deplete family savings to continue receiving necessary medical care, all because an AI model ‘disagrees’ with their real live doctors’ determinations,” the plaintiffs wrote in their complaint.

The company has faced heightened criticism recently for its alleged denial rate, most notably the assassination of former UHC CEO Brian Thompson in New York late last year. Law enforcement said shell casings found at the scene had the words “deny,” “defend,” and “depose” written on them, which references the company’s alleged practice of putting barriers in place to deny treatment to its policyholders.

The man charged with Thompson’s murder, 26-year-old Maryland native Luigi Mangione, has received about $300,000 in crowdfunded donations for his legal defense. Mangione has pleaded not guilty.

UHG motioned to dismiss the lawsuit in May 2024, alleging that the court lacked jurisdiction in the case**. **

In a memorandum supporting its motion to dismiss, UHG argued that the plaintiffs had either not completed the appeals process or sought no further benefits after a denial or approval, meaning the court should be barred from hearing the case.

While Judge John Tunheim ordered several counts in the lawsuit to be dismissed Thursday under the preemption provision in the Medicare Act, including a claim of unfair and deceptive insurance practices, he allowed the lawsuit to proceed under its breach of contract and good faith and fair dealing claims.

Notably, Tunheim waived the requirement that the plaintiffs exhaust all administrative remedies before bringing an action against the insurers, describing UHG’s claim denial process as “futile" with the likelihood that it can cause “irreparable injury.”

While all of the plaintiffs submitted claims for benefits, Tunheim wrote in his opinion that none of them went through the entire appeals process and received a final decision, which forced the court to evaluate whether or not the appeals process was truly feasible considering the plaintiffs’ claims.

“First, UHC allegedly issues repeated denials any time a patient is successful on appeal. As a result, any time a patient gets a denial overturned, another denial is on its way. Second, for the very few appeals that reach the end of the appeals process, UHC allegedly pays the claims and terminates the process,” Tunheim wrote in his opinion. “As alleged in the Complaint, this practice would make it virtually impossible for any claim to progress through the entire four-step appeals process and be ripe for judicial review. Thus, the irreparable injury and futility of the appeals process suggests that waiver of administrative exhaustion is appropriate.”

In one case, outlined in the plaintiffs’ complaint, the health insurance company is accused of repeatedly denying post-acute care coverage to a 74-year-old man who suffered a stroke despite his doctor telling the defendants that he needed continued care.

This forced the man to pay for his medical expenses out of pocket, which amounted to over $70,000 over 10 months before he was discharged from the hospital to an assisted living facility, where he died a little less than a year after he first filed his claim, his estate wrote in the initial class action complaint.

With the dismissal of the lawsuit’s other claims under the broad preemption provision in the Medicare Act, the court will now need to evaluate compliance with the insurance agreements, essentially whether the insurers violated their own contracts with their insured.

Lawyers for both the plaintiffs and UHG did not respond to a request for comment before this story was published.